Staying the Course Amidst Market Volatility

The financial markets have certainly been making headlines this week, with some sharp movements that might feel unsettling. I wanted to offer a bit of perspective during this period.

The past 7 trading days all saw dramatic intraday moves on the S&P 500, with sharp 4-6% declines coupled with a whopping one-day 9.5% increase as well. 

At one point, the market was down 20% from its recent peak in February. 

While the daily volatility can be scary, it’s important to remember that true market “crashes” – events that fundamentally alter the long-term trajectory – are actually quite rare. 

What we are currently experiencing is a significant dip, to be sure, but one that is not without precedent. The scale of these movements is similar to what we navigated during the initial stages of the Covid-19 pandemic. We also saw similar volatility during the 2008 financial crisis.

Each time, the market has recovered even though it was hard to live through these scenarios.

The main takeaway is to step back and look at the bigger picture.

Your financial plan has been specifically constructed to weather periods like these.

A cornerstone of our strategy is diversification. 

Your investments are carefully spread across a mix of shares (representing ownership in companies), bonds (representing loans to governments and corporations), and other asset classes. This deliberate diversification means that your portfolio is not entirely reliant on the performance of any single market sector. When one area experiences a downturn, others can provide a degree of stability and help to cushion the overall impact.

Furthermore, the very structure of your financial plan is a reflection of your individual circumstances, particularly your proximity to retirement. For those of you nearing retirement, a greater portion of your portfolio is strategically allocated to lower-risk assets, such as government bonds. These types of investments tend to hold their value, and in some cases even appreciate, during periods of stock market downturns, providing a crucial layer of protection when you are closest to needing those funds.

Volatility, while it can feel uncomfortable in the short term, is an inherent characteristic of the market. 

And history has repeatedly shown us that markets do recover. 

In the last 70 years, we have had 8 times when the S&P 500 declined 15% or more in a 30-day period.

In every case, the market recovered within 720 trading days (that’s about 2 years and 10 months), and the average return was 50% at the end of that period.

While the timing and pace of that recovery can vary, long-term investing remains one of the most effective strategies for building and growing your wealth over time. Trying to time the market during these swings is often a recipe for missing out on the eventual rebound.

I understand that these periods can raise questions and even anxieties. Please know that we are closely monitoring the situation and are here to provide clarity and support. In the next post, I’ll discuss some longer-term concerns about the economy and investments, and how to mitigate some of these concerns.

If you have any questions about your portfolio, your financial plan, or simply want to talk through the current market environment, please do not hesitate to reach out. We are always here to offer reassurance and guidance.

Staying informed and maintaining a long-term perspective are your most powerful tools during times like these. Trust in the well-diversified foundation we have built together, and remember that we are here to navigate these market movements with you.

So, as always, keep calm and invest!